Goldman Says Buy GAZ, Sollers, in New Russian Mid-Cap Coverage

By Paul Abelsky

June 26 (Bloomberg) -- Carmakers including OAO GAZ and OAO Sollers received a ``buy'' recommendation in Goldman Sachs Group Inc.'s new coverage of 23 Russian small- and mid-cap stocks from cement makers to a warplane manufacturer.

GAZ, Russia's second-biggest carmaker owned by billionaire Oleg Deripaska, and Sollers, formerly called OAO Severstal-Avto, are among the companies that will provide ``super-normal growth opportunities at attractive valuations'' and ``may have been overlooked by the market,'' analysts including Sergei Arsenyev in Moscow wrote in a note to investors today.


Goldman named GAZ, Sollers and Krasnyi Kotelschik, a manufacturer of industrial steam boilers, as its ``top picks'' in in seven industries.

Sibirsky Cement, Russia's second-biggest cement maker, was recommended ``buy.''

Goldman said it's taking a ``neutral view'' on whether small and mid-cap stocks will outperform large caps.

Aerospace is the least preferred industry of the seven as the companies may struggle to become profitable even with government orders, according to the note.

OAO AvtoVAZ, Russia's biggest carmaker, OAO KamAZ, the country's largest truck manufacturer, and warplane maker OAO Irkut Corp. received ``neutral'' recommendations.

OAO Novoil, and OAO Ufaneftekhim, oil companies in the Republic of Bashkortostan, were rated ``buy.'' Goldman said refineries in the republic are ``extremely undervalued.''

Goldman initiated NPO Saturn, which manufactures engines for use in military and civilian aircraft, with a ``sell'' recommendation.

To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@bloomberg.net